Business & Game Theory: Which game are you playing?

The nerdy, yet mesmerising, Simon Sinek visited Sydney on 7 March 2017. He spoke at a Leadership Forum hosted by The Growth Faculty at the International Convention Centre.

Sinek captured me with his version of Game Theory in business.

He explores two types of games:

The Finite Game; and

The Infinite Game.

The Finite Game has known players, fixed rules and an agreed upon objective.

The Infinite Game has both known and unknown players, the rules are changeableand the objective is to stay in the game.

Example of finite games would be baseball, Aussie rules footy and chess. The players are known. The rules are fixed. And the objective is to win the game.

An example of an infinite game would be:

Business.

The players change – businesses like Kodak, Motorola and Apple come and go. The rules are changeable – take the impact of e-commerce on the retail industry for example. And the objective is to stay in the game – e.g. stay solvent and achieve the business vision.

If business were a sport, it wouldn’t value speed – it would value endurance. It would be more ultra-marathon than sprint.

But if being in business is an infinite game, then why do so many of its players talk about it in finite terms?

Businesses frequently describe themselves as “winners”, who aspire to be the “largest”, most “dominant”, or the “best”, who “beat” the competition. There is no “winning” in the game of business – certainly not if you want to be sustainable and have longevity.

In game theory, Sinek explains that if you have a finite player playing another finite player, then the game remains stable. Same with infinite players who play each other.

Problems arise when you pit a finite player against an infinite player.

The finite player becomes frustrated by the infinite player.

The finite player is playing to win – but the infinite player is playing to stay in the game

Words associated with an infinite player are “purpose”, “cause”, “enduring”, “values”, they are intangible and inherently hard to measure. For example: Trust is hard to measure.

Great infinite companies run all their decisions through their values not their interests. Indeed they can even act against their interests, yet within their values.

These companies are the most innovative because their people feel like work is bigger than themselves. They run circles around their competition because they were never racing their competition – they were improving themselves.

Words associated with finite players – the place where our interests lie – are words like “win”, “beat”, “bigger” and “better”. Words that are inherently tangible and inherentlyeasy to measure. For example: Profit is easy to measure.

Finite companies tend to prefer easy to measure metrics instead of take a risk on using intangible measures to incentivise the very best type of behaviour.

And this is where it gets interesting.

Sinek uses the examples of Apple and Microsoft, having consulted at both firms.

He says that Microsoft is a finite player. They are playing to beat Apple.

One way you know you are dealing with a finite player is that they change their strategy when they notice their competitor has changed their strategy. Instead of being guided by their own internal vision or mission, they take external cues from what others are doing and try to beat them.

Yet with Apple, Sinek noticed the executives spend most of their time on the company’s mission (e.g. Making the complex simple) and investigate things like discussing ways to help teachers teach, or help students learn.

Apple is focused on their vision for the future. Microsoft is focused on outperforming Apple.

Sinek says that if a finite player is obsessed with beating the competition – while their competition (who is playing the infinite game) is focused on the future and staying in the game – then the finite player can be frustrated by the infinite player.

Why?

Because the infinite player knows that it – at any point in time – can be ahead or behind.

And that this is OK.

As their goal was never to beat the competition – but to improve themselves.

Infinite companies prioritise sustainable, long-term concerns like taking care of their people, creating ideas that others can’t come up with, and self-development: doing everything to be better than yourself – not the competition.

The risk is that an infinite company may not meet annual targets once in awhile. Yet they live with that because that is not their goal.

The infinite company isn’t just the one that is the most innovative – they are the ones that run circles around their competition because they aren’t focused on beating the here and now competition.

They are focused on creating a better future.

Ironically, in not focusing on making all the dollars right now, and instead working to advance a noble cause, it is often those companies that significantly financially outperform their finite competitors in the end.